Executive Briefings

Old-World Company Takes New-World Approach to Supplier Management

Metals distributor Earle M. Jorgensen Co. finds a better way of dealing with suppliers, through an online ordering system and parts database.

You need one of those multi-level timelines to chart the development of Earle M. Jorgensen Co. One of the world's largest independent metals distributors, Lynwood, Calif.-based EMJ is the product of multiple mergers over its 80-plus years of existence. Today, it sells a wide range of specialty tubing, bars and plate products, made from steel, aluminum and brass. It's an old-line company looking to find a place in the world of high-tech and the internet.

With sales of $1.6bn in fiscal 2005, up 55 percent from the prior year, EMJ appears to be successfully navigating the passage. It has gone from door-to-door sales of metal samples to a thriving business in value-added raw materials for some 35,000 customers in aerospace, construction, industrial equipment, transportation and energy. The company operates more than 35 service centers in the U.S. and Canada, and is expanding steadily. Over the past year, it has opened new or expanded facilities in Spokane, Wash.; Houston, Tex.; Hartford, Conn.; Lafayette, La.; and Toronto, Ont. Last October, it broke ground on yet another satellite facility, in Quebec City, Que.

But the most significant recent development at EMJ might be something that didn't require the laying of a single brick. It was the creation of E-Metals, the company's online ordering system. Via the internet, customers can obtain real-time information on pricing, product availability, order status and test reports. The database includes more than 30,000 SKUs that are easily searchable, supplemented by an electronic stock list with detailed product specifications.

Tracking the history of parts is essential, says senior systems engineer Don Krueger, especially in the world of aerospace. If an airplane part fails, investigators must have a clear trail leading back to its creation.

All of this is central to an industry that has been traditionally non-technical in its operations. Without the benefit of modern information systems, matching supply with demand can be challenging. Manufacturing often involves long production runs of up to six months, followed by a switch to another product. "You don't get another crack at new inventory until they generate it," Krueger says.

Meanwhile, EMJ is working to minimize inventory, contracting with suppliers to hold on to product until it's needed down the line. So the company spends a great deal of time coming up with accurate forecasts of its own needs, as well as those of its customers. Complicating matters are wide swings in pricing that bedevil the industry, especially in recent months, with China buying up most of the world's steel scrap.

The Trouble With Batch
EMJ has had an electronic connection with its suppliers since the mid-1990s, but it was based on a batch-oriented legacy system that Krueger describes as "unwieldy, cumbersome and difficult to research problems." The company maintained an entire department just to manage its electronic data interchange (EDI) processes. Bringing new suppliers into the system was a huge task, and once they were up, errors were common.

Several years ago, EMJ migrated to the Gentran Server of Dublin, Ohio-based Sterling Commerce. Gentran is a unified software suite consisting of Web-based modules for business-to-business commerce, translation, integration and process management. The product still operates in classic EDI mode, Krueger says, but it offers "a far more stable environment" to users.

EMJ had previously decided to switch over to the Microsoft BizTalk server for B2B communications with suppliers. But early participants found the tool difficult to use, prompting EMJ to embrace open-source standards. That led to adoption of the Gentran suite. It gave EMJ an ordering system that could accommodate suppliers with a wide range of technological sophistication. As a result, the company increased the number of suppliers doing online fulfillment from four to 12.

The system paved the way for more suppliers; the goal is 80 by the end of this year. Jim Aten, Sterling's vice president of product manager for infrastructure, says the new tool has allowed EMJ to scale up the number of participants and the services they were offered for online ordering. It also lets them conduct business as usual. More than 80 percent of worldwide B2B traffic still moves on a file-to-file basis, he says.
EMJ has its eye squarely on the future, however. It is looking beyond traditional EDI to the promise of extensible markup language (XML), the still-developing protocol for transmitting data over the internet on a real-time basis, without the need for third-party intermediaries. "They wanted to adapt to whatever was coming at them," says Aten.

EMJ's goal is to handle complex orders with multiple parties outside the company, via the internet. Gentran's visibility manager can group related transactions into a coherent business process and create one place from which to track items in the supply chain- "a single point of truth," as Aten calls it. The system also alerts users when a transaction falls outside defined service parameters.

A World of Tradition
Getting suppliers to embrace a state-of-the-art B2B environment can be a tough task, especially in the tradition-bound world of industrial metals. EMJ began with purchase orders and acknowledgments, eliminating a raft of faxes at the outset. At the same time, the company has been working with the Metals Service Center Institute, an industry trade association, to create a single set of transaction standards for online commerce between distributors and suppliers.

The response to date among member companies has been mixed, says Krueger. "It's been a long, drawn-out process to get everybody thinking in the same terms. Nobody wants to be the pioneer."

EMJ is also pursuing industry standards through a partnership with the World Wide Web Consortium (W3C), an international group formed to develop common protocols for internet use. The company has already completed a set of proposed XML standards and submitted them to several suppliers, even as it continues to exchange basic flat files. All of the developing and existing formats are supported by the Gentran Integration Suite, Krueger says.

EMJ plans to convert to a new version of Gentran soon. The update will contain more Web-based capability for error reporting and tracking, both for documents and physical goods. For now, says Krueger, the company continues to utilize both fax and internet, as it slowly convinces suppliers to adopt the new way of doing business.

You need one of those multi-level timelines to chart the development of Earle M. Jorgensen Co. One of the world's largest independent metals distributors, Lynwood, Calif.-based EMJ is the product of multiple mergers over its 80-plus years of existence. Today, it sells a wide range of specialty tubing, bars and plate products, made from steel, aluminum and brass. It's an old-line company looking to find a place in the world of high-tech and the internet.

With sales of $1.6bn in fiscal 2005, up 55 percent from the prior year, EMJ appears to be successfully navigating the passage. It has gone from door-to-door sales of metal samples to a thriving business in value-added raw materials for some 35,000 customers in aerospace, construction, industrial equipment, transportation and energy. The company operates more than 35 service centers in the U.S. and Canada, and is expanding steadily. Over the past year, it has opened new or expanded facilities in Spokane, Wash.; Houston, Tex.; Hartford, Conn.; Lafayette, La.; and Toronto, Ont. Last October, it broke ground on yet another satellite facility, in Quebec City, Que.

But the most significant recent development at EMJ might be something that didn't require the laying of a single brick. It was the creation of E-Metals, the company's online ordering system. Via the internet, customers can obtain real-time information on pricing, product availability, order status and test reports. The database includes more than 30,000 SKUs that are easily searchable, supplemented by an electronic stock list with detailed product specifications.

Tracking the history of parts is essential, says senior systems engineer Don Krueger, especially in the world of aerospace. If an airplane part fails, investigators must have a clear trail leading back to its creation.

All of this is central to an industry that has been traditionally non-technical in its operations. Without the benefit of modern information systems, matching supply with demand can be challenging. Manufacturing often involves long production runs of up to six months, followed by a switch to another product. "You don't get another crack at new inventory until they generate it," Krueger says.

Meanwhile, EMJ is working to minimize inventory, contracting with suppliers to hold on to product until it's needed down the line. So the company spends a great deal of time coming up with accurate forecasts of its own needs, as well as those of its customers. Complicating matters are wide swings in pricing that bedevil the industry, especially in recent months, with China buying up most of the world's steel scrap.

The Trouble With Batch
EMJ has had an electronic connection with its suppliers since the mid-1990s, but it was based on a batch-oriented legacy system that Krueger describes as "unwieldy, cumbersome and difficult to research problems." The company maintained an entire department just to manage its electronic data interchange (EDI) processes. Bringing new suppliers into the system was a huge task, and once they were up, errors were common.

Several years ago, EMJ migrated to the Gentran Server of Dublin, Ohio-based Sterling Commerce. Gentran is a unified software suite consisting of Web-based modules for business-to-business commerce, translation, integration and process management. The product still operates in classic EDI mode, Krueger says, but it offers "a far more stable environment" to users.

EMJ had previously decided to switch over to the Microsoft BizTalk server for B2B communications with suppliers. But early participants found the tool difficult to use, prompting EMJ to embrace open-source standards. That led to adoption of the Gentran suite. It gave EMJ an ordering system that could accommodate suppliers with a wide range of technological sophistication. As a result, the company increased the number of suppliers doing online fulfillment from four to 12.

The system paved the way for more suppliers; the goal is 80 by the end of this year. Jim Aten, Sterling's vice president of product manager for infrastructure, says the new tool has allowed EMJ to scale up the number of participants and the services they were offered for online ordering. It also lets them conduct business as usual. More than 80 percent of worldwide B2B traffic still moves on a file-to-file basis, he says.
EMJ has its eye squarely on the future, however. It is looking beyond traditional EDI to the promise of extensible markup language (XML), the still-developing protocol for transmitting data over the internet on a real-time basis, without the need for third-party intermediaries. "They wanted to adapt to whatever was coming at them," says Aten.

EMJ's goal is to handle complex orders with multiple parties outside the company, via the internet. Gentran's visibility manager can group related transactions into a coherent business process and create one place from which to track items in the supply chain- "a single point of truth," as Aten calls it. The system also alerts users when a transaction falls outside defined service parameters.

A World of Tradition
Getting suppliers to embrace a state-of-the-art B2B environment can be a tough task, especially in the tradition-bound world of industrial metals. EMJ began with purchase orders and acknowledgments, eliminating a raft of faxes at the outset. At the same time, the company has been working with the Metals Service Center Institute, an industry trade association, to create a single set of transaction standards for online commerce between distributors and suppliers.

The response to date among member companies has been mixed, says Krueger. "It's been a long, drawn-out process to get everybody thinking in the same terms. Nobody wants to be the pioneer."

EMJ is also pursuing industry standards through a partnership with the World Wide Web Consortium (W3C), an international group formed to develop common protocols for internet use. The company has already completed a set of proposed XML standards and submitted them to several suppliers, even as it continues to exchange basic flat files. All of the developing and existing formats are supported by the Gentran Integration Suite, Krueger says.

EMJ plans to convert to a new version of Gentran soon. The update will contain more Web-based capability for error reporting and tracking, both for documents and physical goods. For now, says Krueger, the company continues to utilize both fax and internet, as it slowly convinces suppliers to adopt the new way of doing business.